The Empirical Evidence of the Effect on the Enterprises R&D from Government Subsidies, Political Connections and Rent-Seeking

This study investigates the impact of rent-seeking behavior, political connections, and government science and technology (S&T) subsidies on the research and development (R&D) of private listed enterprises. Based on empirical data of China’s private listed enterprises between 2008 and 2012, this paper performs validation at three levels and obtains suggestive conclusions. First of all, the purpose to obtain more S&T subsidies motivates private listed enterprises to take rent-seeking activities which can facilitate them in establishing political connections (PCs). Secondly, rent-seeking activities could eventually result in crowing-out effect of the R&D input, especially for the local PCs. Thirdly, the side effect of rent-seeking is more significant for enterprises located in provinces of high corruption levels, which weakens the availability of government S&T subsidies. The improper intervention of government distorts the market resources allocation.